The paper "Market Size Matters: A Model of Excess Volatility in Large Markets" to which these Appendices apply is available at the following URL: "http://ssrn.com/abstract=2575481" http://ssrn.com/abstract=2575481

We present a model of excess volatility based on speculation and equilibrium multiplicity. Each trader has two distinct motives to trade: (i) speculation based on noisy signals, and (ii) hedging against endowment shocks. The key to equilibrium multiplicity is the self-fulfilling nature of...